1 The Role of Culture, Politics and Law What is Culture: Culture is the collection of values, beliefs, behaviors, customs, and attitudes that distinguish

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The Role of Culture, Politics and LawThe Role of Culture, Politics and Law

What is Culture:

Culture is the collection of values, beliefs, behaviors, customs, and attitudes that distinguish a society.

Culture is the conventionalized behavior of a society.

A society’s culture determines the rules that govern how firms operate in the society.

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As firms expand their sales into foreign markets, locate production facilities abroad, and search the world for the most productive and talented employees, they are increasingly challenged by the cultural differences among countries and among people with whom they do business.

Improvements in communications techno-

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logy and reduction in transportation costs have raised the frequency of cross-cultural contacts.

It also increased the importance of a firm’s understanding the role of culture in business activities if it wants to remain competitive internationally.

Characteristics of culture:

i. Learned Behavior: Culture reflects learn

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-ed behavior that is transmitted from one member of a society to another.

Some elements of culture are transmitted intergenerationally, as when father teaches his child table manners.

Other elements are transmitted intragener-ationally, as when upper classmen educate incoming freshmen about a school’s traditions.

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ii. Elements are interrelated: The elements of culture are interrelated. For example, group-oriented, harmony, lifetime employment, little job switching.

iii. Culture is adaptive: Because culture is leaned behavior, it is adoptive.

The culture changes in response to external forces that affect the society.

iv. Culture shared: Culture is shared by

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members of the society and indeed defines the membership of the society.

Individuals who share a cultures are members of a society; those who do not are outside the boundaries of the society.

v. Culture is invented: Culture does not simply exist somewhere to be disco vered. People invent their culture, e.g. ideological, technological, organizational

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vi. Cultures are similar but different: All

cultures exhibit certain similarities.

For example, each of the following elements is found in all societies. athletic sports, a calendar, cooking, dancing, education, family, government, housing, language, music, law etc.

vii.Culture is prescriptive:Culture involves

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ideal standards or patterns of behavior so that members of society have a common understanding of the right and proper way to think, feel and act.

Elements of Culture:

A society’s culture determines how its members communicate and interact with each other.

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Culture

Language

Social Structure

Values and

Attitudes

Communication

Religion

Fig: Elements of Culture

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i. Social Structure: Basic to every society is its social structure.

It is the overall framework that determines the roles of individuals within the society, the stratification of the society, and individual’s mobility within the society.

Individuals, Families and Groups: All human societies involve individuals

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living in family units and working with each other in groups.

Societies differ in how the family is defined and in the relative importance they place on the individual’s role within groups.

Social stratification: All societies categor ize people to some extent on the basis of their birth, occupation, educational

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achievement and or their attributes.

Social mobility: It is the ability of individuals to move from one stratum of society to another.

ii. Language: Language is a primary delineator of cultural groups because it is an important means by which a society’s members communicate with each other.

There are 3000 different languages.

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Same language, same business culture? We can not conclude that countries that share same language do not share same culture. USA and UK

Language as a competitive weapon: It is a competitive advantage because the ability to communicate is so important in conducting business transactions.

English as common language in USA, UK

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Canada, New Zealand, Australia etc.

Translation: Most international businesses must adjust their practices to account for cultural differences is the translation of advertising, operating instructions, and other printed materials.

Saying yes or no: Misunderstanding may create to use yes or no in different cultures.

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iii. Communication: Communicating acr oss cultural boundaries, whether verbal or nonverbal, is particularly important skill for international managers.

Miscommunication increase substantially when the people are from different cultural backgrounds.

A low-context culture is one in which the words used by the speaker explicitly

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Convey the speaker’s message to the listener.

A high-context culture is one in which a conversation occurs is just as important as the words that are actually spoken and cultural clues are important in understan ding what is being communicated.

Nonverbal communication: Members of the society communicate with such other

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using more than words.

The use of facial expressions, gestures, eye contact, body positioning, body postures.

Gift giving and hospitality: Elaborate meals and after-hour entertainment server to build personal bonds and group harmony among the participants.

iv. Religion: It affect the ways in which members of a society relate to each other

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and to outsiders.

Religion shapes the attitudes its adherents have toward work, consumption, individual responsibility, and panning for the future.

v. Values and Attitudes: Values are the principles and standards accepted by members of a society, attitudes encom pass the actions, feelings and thoughts

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that results from those values.

Time: Attitudes about time differ dramati-cally across cultures. Time is money, time is a great healer.

Age: Important cultural differences exist in attitudes towards age. China deals with older, USA focus on young.

Education: A country’s formal system of public and private education is an impor

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tant transmitter and reflection of the cultural values of its societies.

Status: In some society, status is inherited as a result of the wealth or rank of one’s ancestors. For example, UK

In some society, it is earned by the individual through personal accomplish ments or professional achievements. For example, USA.

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Individual Differences, Culture, and Business Behavior:

These elements of national culture affect the behavior and expectations of manager & employees in the work place.

i. Social Orientation: It is a person’s beliefs about the relative importance of the individual and the groups to which that person belongs.

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a) Individualism: It is the cultural beliefs that the person comes first. Own interest, and those of their families ahead.

b). Collectivism: It is the belief that the group comes first. Well defined social networks, extended families, tribes etc.

ii. Power Orientation: It refers to the beliefs that people in a culture hold about the appropriateness of power & authority

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a) Power Respect: People in a culture tend to accept the power and authority of their superiors simply on the basis of the superior positions in the hierarchy and to respect the superiors’ right to the power.

b). Power Tolerance: These people are more willing to question a decision or mandate from someone at a higher level or perhaps even refuse to accept it.

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iii. Uncertainty Orientation: It is the feeling of people have regarding uncer-tain and ambiguous situations.

a) Uncertainty Acceptance: Stimulated by change and thrive on new opportunities. Ambiguity is seen as a context within an individual can grow, develop, and carve out new opportunities.

b) Uncertainty Avoidance: People dislike

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and will avoid ambiguity whenever possible. Ambiguity and change seen as undesirable.

iv. Goal Orientation: It is manner in which people are motivated to work toward different kinds of goals.

a). Aggressive goal behavior: People tend to place a high premium on material possessions, money and assertiveness.

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b). Passive Goal Behavior: It places a high value on social relationships, quality of life and concern for others.

v. Time Orientation: It is the extent to which members of a culture adopt a long-term vs short-tem outlook on work, life, and other aspects of society.

These issues are very much important in doing business internationally.

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Time OrientationLong-Term Short-Term

Goal OrientationAggressive Passive

Uncertainty OrientationAcceptance Avoidance

Power OrientationRespect Tolerance

Social OrientationIndividualism Collectivism

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International Management and Cultural Differences:

Given the complexities of culture, how should and international manager go about trying to conduct business across national boundaries?

Three specific concepts that need acknowl-edgment include cultural clusters, how to better understand new cultures,and ethics

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i. Cultural Clusters: Cultural differences provide challenges to international busi-nesspeople, in marketing product, manag ing work forces, and dealing with host country governments.

A cultural cluster comprises countries that share similarities, although differences do remain. Many clusters based on language, others on values.

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Some experts believe the world’s cultures are growing more similar as a result of improvements in communications and transportation.

ii. Understanding New Cultures: When dealing with a new cultures, many international businesspeople make mis-take of relying on the self reference criterion, the unconscious use of one’s

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own culture to help assess new surroundings.

There are numerous ways to obtain know ledge about other cultures in order to achieve cross-cultural literacy.

Cross-cultural literacy is the first step in acculturation, the process by which a person not only understands a foreign culture but also modifies and adapts his

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or her behavior to make it compatible with that culture.

iii. Cultural Differences and Ethics:

Cultural differences often create ethical problems. Acceptable behavior in one culture may be viewed as immoral in another.

Need less to say, all issues will reflect your culture as well as personal circumstances

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Differences in Legal Systems:National legal systems vary dramatically.

The rules of law, The role of lawyers, The burden of proof, The rights of judicial review, The laws of themselves

Differ for historical, cultural, political and religious reasons.

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International business people must be aware of the legal systems of the host countries in which their firms operate, for the firms’ legal obligations in those countries will likely differ from those in their home country.

Common Law: Common law is the found-ation of the legal system in many country based on cumulative wisdom of judges’

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Civil Law: It is based on a codification, or detailed listing, of what is and in not permissible.

Religious Law: It is based on the officially established rules governing the faith and practice of a particular religion.

Bureaucratic Law: The legal system in communist countries and in dictatorships is often described as bureaucratic las

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Bureaucratic law is whatever the country’s bureaucrats say it is, regardless of the formal law of the land.

International businesspeople must be aware of these general differences in legal systems to avoid unfortunate mis-understandings.

They should rely on the expertise lawyers in each country in which they operate.

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Dispute Resolution in International Business:

Like purely domestic transactions, conflict often arise in international business.

Resolving disputes in international commerce can be very complicated.

Typically four questions must be answered for in international dispute to resolve:

i. Which country’s law applies?

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ii. In which country should the issue be resolved?

iii. What technique should be used to resolve the conflict – litigation, arbitration, mediation, or negotiation.

iv. How will the settlement be enforced?

Many international business contracts specify answers to these questions in order to reduce uncertainty and expense

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in resolving disputes.

The Political Environment:

An important part of any business decision is assessing the political environment in which the firm operates.

Political Risk: Political risks are defined as any changes in the political environment that may adversely affect the values of the firm’s business.

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Confiscation: the most severe political risk. Seizing a company’s assets without payment and imposing embargo against trade with nations

Expropriation: less drastic but severe political risk it provide some reimburse ment for the government-seized investment

Domestication: another type of political risk, Host country takes steps to transfer foreign investment to national control

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Economic risks: To protect an infant industry of a country.

☼ Exchange control ☼ Tax control☼ Local content laws ☼ Price control☼ Import restrictions ☼ Labor problemsMost political risk can be divided into:

i. Ownership riskii. Operating riskiii. Transfer risk.

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Strategies to lessen political risk:

☼ Joint venture

☼ Marketing and distribution

☼ Expanding the investment base

☼ Licensing

☼ Planned domestication

☼ Political payoffs

Documents

1 The Role of Culture, Politics and Law What is Culture: Culture is the collection of values, beliefs, behaviors, customs, and attitudes that distinguish